Ambec, StefanORCID: https://orcid.org/0000-0002-9066-5035, Andersson, Henrik, Cezera, Stéphane, Kanay, Aysegul, Ouvrard, BenjaminORCID: https://orcid.org/0000-0001-8314-0006, Panzone, Luca A. and Simon, Sebastian (2025) Taxing and nudging to reduce carbon emissions: Results from an online shopping experiment. TSE Working Paper, n. 25-1690, Toulouse

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Abstract

What can be done to reduce the carbon footprint of consumption? To answer
this, we conducted an online shopping experiment that tested the effects of two
policy tools: a carbon tax (at two levels) and a behavioral nudge in the form of a
traffic light-style label indicating a product’s carbon footprint (green for low, orange
for medium, and red for high). To disentangle the tax’s substitution effect from
its income effect, we held consumers’ purchasing power constant. We find that
the tax alone significantly reduces the carbon footprint per euro spent but not per
basket purchased, implying that the reduction is driven purely by the income effect.
The label alone makes consumers buy fewer red products and more green products,
although without reducing significantly their carbon footprint. We do find some
substitution effect and a significant reduction of the carbon footprint per basket
only when the tax is high enough and combined with the label. Next, we perform a
welfare analysis grounded on a theoretical framework that accommodates for several
assumptions about consumer’s preferences and motivations. We estimate the loss of
consumer’s surplus from nudging consumers with the label. We also estimate the
consumers’ valuation of a ton of CO2 avoided when they care about their climate
impact.